Nuclear Power and California S Clean Energy Future

Informational Hearing:

Nuclear Power and California’s Clean Energy Future

Introduction

Nuclear power is undergoing something of a rebirth. Following accidents at Three Mile Island in Pennsylvania and Cherynobl in the former Soviet Union, nuclear power-plant construction virtually halted. Concerns about safety, cost, and environmental impacts made nuclear power unattractive. However, climate change, growth in electricity demand, and persistently higher fossil fuel prices have reignited the debate over nuclear power, and whether it is a competitive and proliferation-resistant resource inside the United States and internationally.

In California the need for carbon-free electric generation is heightened by the implementation of Assembly Bill 32 which requires California by 2020 to reduce its greenhouse gas (GHG) production to 1990 levels. In addition, executive order S-3-05 requires California to reduce GHG emissions to 80% of 1990 levels by 2050. To put those numbers in perspective, more than one researcher suggests that to stabilize or reduce global greenhouse emissions, California will need to completely eliminate carbon emitting energy production from their overall energy portfolio by 2020.

Given that nuclear power already makes up about 15% of California‘s overall energy portfolio, California‘s energy consumption is projected to significantly increase over the next decade, and the remaining operating nuclear power plants in California are scheduled to be decommissioned over the next several decades, California must at some point address the question of the role of nuclear power in meeting the state’s electricity demand.

It has been 13 years since the last new nuclear power plant opened in the United States. The Obama Administration is using federal tax incentives and loan guarantees to fund a new crop of nuclear power plants across the United States. Domestically, two new reactors are scheduled to go on-line in Georgia in 2017 and 2018 respectively. Furthermore, several applications and notices of intent to apply for operating licenses have been filed with the U.S. Department of Energy. Internationally, the number of plants being built is double the total of just five years ago. Specifically, 53 plants are now under construction with China accounting for approximately one-third of those reactors. Poland, the United Arab Emirates, and Indonesia are seeking to build their first reactors.

Because of these rapid changes described above, in 2009 the Massachusetts Institute of Technology (MIT) updated a 2003 report on the future of new nuclear power. The report concluded that, “Nuclear power could be one option for reducing carbon emissions and that taking nuclear power off the table as a viable alternative will prevent the global community from achieving long-term gains in the control of carbon dioxide emissions." The study also warned that the prospects for nuclear energy as an option are limited, primarily due to four unresolved problems:

1)  High relative costs;

2)  Perceived adverse safety, environmental, and health effects;

3)  Potential security risks stemming from proliferation; and

4)  Unresolved challenges in long-term management of nuclear wastes.

However, the MIT assessment also concluded that in the United States, there have been a series of positive developments since 2003 that could enable new nuclear deployment in the future including:

·  Performance of the 104 U.S. nuclear plants since 2003 has been excellent in terms of increased kWh electricity produced by the reactors which has steadily increased over the last five years;

·  Nuclear reactors extended operating licenses. Nuclear reactors typically have initial operating licenses from the Nuclear Regulatory Commission (NRC) for 40 years. The earlier trend to obtain license extensions to operate existing nuclear reactors an additional 20 years (total of 60 years) has continued with the expectation that almost all reactors will receive license extensions; and

·  Seventeen applications for combined construction and operating licenses for 26 reactors have been submitted to the NRC. Preliminary work required before construction is underway for many of these plants such as design, licensing applications development, and procurement of long-lead items.

Below is a brief background on several of the issues highlighted by the MIT study this hearing will address within the context of California energy future.

Nuclear Power and Climate Change Mitigation

In 2008 coal-based power plants represented over 40 percent of global electricity-generating capacity. With increasing population and increasing reliance on fossil fuel based power plants (particularly in China and India), anthropogenic GHG emissions are predicted to double by 2030. In the U.S. 90% of the carbon emissions from electricity generation come from coal-fired generation, even though this accounts for only 52% of the electricity produced.

Nuclear power is considered one component of a low carbon-electricity future. Nuclear plants emit few GHGs over their 40- to 60-year lifetimes and no direct carbon dioxide emissions during their operation. In addition, they are considered a direct replacement for coal plants, the technology that produces 75 percent of global GHG emissions in the electricity sector.

Due to relative advantages listed above, an interesting nexus between environmentalists and nuclear power has begun to emerge. As an example, the Environmental Protection Agency analysis of the now defunct Waxman-Markey bill predicted nuclear energy generation to more than double in the United States by 2050. Furthermore, while several environmental organizations still oppose new nuclear power plants in the United States there has become in the words of Steve Cochran director of the National Climate Campaign at the Environmental Defense Fund – “a grudging acceptance” of the role of nuclear power. As Cochran stated, “If we are really serious about dealing with climate change, we are going to have to be willing to look at a range of options and not just rule things off the table. We may not like it, but that's the way it is."

California and Nuclear Power

There are four nuclear power plants in California, two of which have been decommissioned. Pacific Gas and Electric’s (PG&E’s) Humboldt Bay Nuclear Powerplant, located near Eureka was shuttered in 1976 because of seismic issues. The Sacramento Municipal Utility District’s much larger Rancho Seco Nuclear Generating Station was shut down in 1989 by a vote of its customers.

The remaining operating nuclear power plants in California are PG&E’s Diablo Canyon Power Plant in San Luis Obispo and the San Onofre Nuclear Generating Station (SONGS), jointly owned by Southern California Edison (SCE) and San Diego Gas and Electric Company. In addition, a third plant near Phoenix, Arizona—the Palo Verde Nuclear Generating Station—supplies California with electricity and is partially owned by several California public utilities. Overall, about 15% of California electricity is generated from nuclear power.

Under California law, the California Energy Commission (CEC) cannot certify a nuclear power plant for operation within California until the federal government has demonstrated and approved:

1)  A technology for the construction and operation of nuclear fuel rod reprocessing plants; and

2)  A demonstrated technology or means for the disposal of high-level nuclear waste.

In effect, the two conditions described above have created a moratorium on the construction of new nuclear power plants in California as neither of these conditions has been met.

As part of the 2005 Integrated Energy Policy Report (IEPR) process, the CEC reviewed the status of nuclear power as an energy resource for California. The CEC found, as it had in 1978, that a technology for the permanent disposal or reprocessing of high-level waste had not been demonstrated nor approved for use in the United States. Consequently, the CEC cannot provide land-use permits or certification for a new nuclear power plant in California.

Other relevant key findings of the 2005 IEPR on nuclear power included:

·  Reprocessing remains substantially more expensive than waste storage and disposal and has substantial adverse implications for U.S. efforts to halt the proliferation of nuclear weapons;

·  The Legislature should develop a suitable state framework to review the costs and benefits of nuclear power plant license extensions. The state should consider the potential extensions of operating licenses, along with other resource options;

·  The state should evaluate the long-term implications of the continuing accumulation of spent fuel at California’s operating plants;

·  California should reexamine the adequacy of California’s nuclear transport fees and federal funding programs to cover the state’s costs of spent fuel shipments; and

·  The federal government should return some portion of the funds paid by California ratepayers for a permanent national repository for nuclear waste to pay for interim storage of waste.

No new nuclear plants have been constructed in California in more than 30 years. Without access to a permanent disposal site for nuclear waste, SONGS and Diablo Canyon “temporarily” store their nuclear waste on site, either in water or in “dry case” cement casings (aka dry cask storage). For example, SCE which manages SONGS, stores long-term spent nuclear on-site in dry-cask storage. SCE has stated that they have sufficient space at SONGS to accommodate the used fuel generated through the current operating licenses and for an additional 20-year period (assuming license renewal). The federal government is statutorily obligated to take title of the used fuel for final disposition.

Yucca Mountain Storage Facility

Approximately 57,700 tons of nuclear waste sit at more than 100 temporary sites with tons more being generated each year. While there appears to be an international consensus that long term storage of nuclear waste in deep underground geologically stable repositories is ideal, no nation including the United States has yet opened such a site.

In 2002 the U.S. Congress approved the Yucca Mountain Repository in Nevada (approximately 100 miles north of Las Vegas) as the designated deep geological repository storage facility for spent nuclear fuel and other radioactive waste. Multiple trenches have been dug in order to assess the geological and hydrologic stability of the area. However, in 2009 the Obama Administration stated that the site was no longer an option and proposed to eliminate all funding in the 2009 federal budget. Congress voted to cut the project’s FY2009 budget to $196 million, the lowest amount ever, and continuing a five-year trend in which funding has been significantly below the amounts requested by the DOE. The state of Washington and several other states are suing to keep Yucca Mountain open. The US Court of Appeals for the District of Columbia Circuit is currently considering the petition.

The 2003 MIT study recommended that the U.S. undertake a significant R&D program for long-term integrated waste management that includes improved repository performance (such as alternative engineered barriers) and examination of alternatives. The central concern was that the federal programs have had a narrow focus and have not explored an adequate range of technical options. The need remains for a broader program that creates an understanding of the range of waste management options, is coupled with fuel cycle modeling, and provides a basis for robust long-term waste management policies.

Economics

Many federal and state policymakers in the United States are promoting clean energy as a principal solution to the problem of increasing GHG emissions that contribute to global warming in the face of predicted long term increases in the demand for energy. While these policymakers almost universally promote renewable energy generation, such as wind farms and solar projects, as a key part of that solution, many express reservations about the viability of new nuclear power as another important part of a green energy policy. Part of the reluctance to embrace nuclear power stems from doubts among policymakers about the appetite of banks and other private financiers to fund the enormous development and construction costs required to build new nuclear reactors. For example, the estimated cost of building a nuclear power plant has risen from approximately $400 million in the 1970s to approximately $4 billion in the 1990s while construction times doubled during the same time period. In addition, of the 253 nuclear power reactors originally ordered between 1953 and 2008, 48% were cancelled at different stages of production before ever coming on-line, reflecting the historical financial risks associated with investing in nuclear power plants. These doubts have been reinforced by recent instability in global credit and capital markets. Notwithstanding the reservations of some policymakers, the federal government has implemented a number of incentive programs to spur development.

Specifically, the federal government and many state governments have streamlined regulatory processes and instituted financial incentives to promote the construction of nuclear power reactors and to overcome first-of-a-kind risks until efficiencies of standardization are achieved. In addition The Energy Policy Act of 2005 created three main types of financial incentives that may be available alone or in combination for the construction of nuclear facilities:

1)  Production Tax Credits (PTCs): PTCs allow tax credits of 1.8 cents per kilowatt-hour for up to 6,000 megawatts of newly constructed nuclear power reactors;

2)  Loan Guarantees: Offer guarantees of debt service under construction loans for up to eighty percent of the construction costs of new nuclear projects; and

3)  Regulatory Risk Insurance: The program is designed to mitigate the concerns of debt investors and developers associated with delays in achieving commercial operation of a new nuclear reactor as a result of the regulatory licensing process or litigation.

The first nuclear loan guarantee was awarded in February 2010 to Southern Company for a project in Georgia south of Augusta. The cost of the project was $14 billion and the federal loan guarantee was for $8.3 billion dollars out of $18.5 billion dollars set aside by Congress for new nuclear reactor construction. The reactors are scheduled to go online in 2016 and 2017 respectively.

In addition, to the loan guarantees changes in the licensing process have also occurred. In the past, “nuclear hopefuls” would first apply to the NRC for a construction license. After the plant was finished, they would ask the NRC for an operating license. In the many years between construction and operating licenses, parameters changed dramatically, often leading to cost overruns. Today a utility applies for a single license, called a combined operating license which is designed to reduce the cost and time overruns typical of older licenses. Multiple experts on the finance side in the government and in private industry believe it is still too early in the process to evaluate the success or failure of above described approaches.

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